China's service sector new magnet for foreign capital: report

BEIJING - China's fast-growing service sector has become a new magnet for overseas investors looking for opportunities in the world's biggest emerging market, a report from Industrial Bank Co Ltd said.

Nearly $50 billion in foreign direct investment (FDI) entered the sector in the first half (H1) of 2016, 8 percent more than that of the same period last year and representing 70.4 percent of the country's total FDI.

FDI in the manufacturing sector, however, declined 2.8 percent, only accounting for 28.3 percent of the total.

Given rising salaries and land prices, the manufacturing industry has lost its appeal to foreign investment, and the emerging service sector is overtaking it, a research note from Industrial Bank said.

"There is an evident differentiation," said the report.

Confronted with a slowing economy, China is counting on its service sector to prop up growth and create jobs, rolling out more favorable policies, including easier market access and fewer restrictions on foreign capital.

The service sector expanded 7.5 percent year on year in H1, outpacing a 3.1-percent increase in primary industry and 6.1 percent in secondary industry. It accounted for 54.1 percent of the overall economy, up 1.8 percentage points from a year earlier.

The bank expects more overseas capital to flow into the service sector thanks to an expanding global outsourcing market and further opening of the country's economy.

Despite the slowdown, China remained one of the world's most important investment destinations.

FDI in the Chinese mainland, which excludes investment in the financial sector, rose 5.1 percent year on year to $69.42 billion in H1, with the growth rate accelerating from the 3.8 percent registered in the first five months.